District Mines Ltd press release

Diamond Fields Resources Announces the Proposed Acquisition of Moydow to Create a New West African Gold Explorer

2021-08-25

TSXV - TSX Venture Exchange · Canada · M&A / Asset Transactions

VANCOUVER, BC / ACCESSWIRE / August 25, 2021 /Diamond Fields Resources Inc.(TSXV:DFR) ("DFR" or, including its subsidiaries, the "Company") is pleased to announce that it has entered into definitive agreements to acquire privately owned Moydow Holdings Limited ("Moydow") (the "Transaction") which holds interests in a number of West African gold exploration projects.

Transaction Highlights

Acquisition of a right to an 80% controlling stake in an advanced exploration stage gold project, Labola, in Burkina Faso - a highly prospective project with more than 65,500 meters of historical drilling. A recently completed RC drilling campaign is expected to lead to publication of a maiden resource estimate prepared in accordance with NI 43-101 before the end of the year; Additional exposure to minority, joint venture interests in projects located in Mali (Kalaka - 40%) and Nigeria (up to 32.5%), providing multi-stage exploration prospects; Continuing exposure to DFR's high grade zircon project, Beravina and Namibian offshore diamond resources; Combination of management from Moydow and DFR to create a strengthened technical team with significant expertise in developing gold projects led by Brian Kiernan and David Reading; and New equity funding in Moydow and DFR totaling US$2.75m from key shareholders, Jean-Raymond Boulle and Brian Kiernan, to eliminate existing debt in DFR, fund exploration of the properties and for working capital purposes.

The Transaction is expected to close in the first quarter of 2022 and is subject to approval by the TSX Venture Exchange, required shareholder approvals, and completion of satisfactory confirmatory due diligence by DFR.

Sybrand Van Der Spuy, CEO and President of DFR stated:

"The Board of DFR has reviewed many projects and we are delighted to have located one that satisfies our acquisition criteria and which presents an exceptional opportunity for future development. We believe that the Transaction represents a compelling opportunity in the gold sector and in Africa, a continent in which all of our recent investments have been made. I would like to thank DFR's Strategic Committee for its tireless efforts in pursuit of this opportunity.

"There exists a longstanding mutual respect for the track records of the respective key shareholders and management teams in Moydow and DFR, which facilitated this transformative agreement. By combining Moydow's strong, gold focused operational competence in West Africa with DFR's access to financial markets and development skills the Company expects to rapidly progress the highly prospective Labola project. This will involve the continued consolidation and analysis of historic geological data, as well as recently completed drilling and assaying. The short-term objective is to report a maiden resource estimate for the Labola project prepared in accordance with NI 43-101 by the end of this year."

Brian Kiernan, Executive Chairman and Founder of Moydow stated:

"This Transaction will enable public participation in this exciting suite of assets. We understand the potential of Labola and the combined company will have the necessary resources to rapidly advance the project. We already have a dedicated team of six highly experienced geologists on the project, who are led by David Reading. Moydow's initial drilling program has concluded, and a maiden resource estimate is expected to be filed by end of year."

David Reading, Director of DFR and Lead Technical Consultant to Moydow stated:

"This is a unique opportunity for investors to gain access to an advanced exploration project, Labola, in a highly prospective region, with an extensive database of historic exploration work. There are multiple targets for further expansion on Labola, which we expect to aggressively pursue. Historic work on the project will enable us to accelerate the reporting of a maiden resource estimate and further drilling is expected to increase the resource over time as targets are drilled."

Overview of Moydow

Moydow is a privately owned, BVI registered, West African focused gold exploration business, which was formed in 2019. It acquired its interests in the Labola project (Burkina Faso) and the Kalaka project (Mali) from AIM-listed Panthera Resources Plc ("Panthera") in 2020 and 2021 respectively.

At closing of the Transaction ("Closing"), Moydow will be majority-controlled by DFR through the acquisition (and exchange) of Moydow shares currently owned by Brian Kiernan, an experienced gold industry entrepreneur, and several other minority shareholders, including Al Gourley, Chairman of DFR (together "the Minority Shareholders"). A restructuring of the Panthera shareholding in Moydow will result in the project interests set out below.

Labola - Burkina Faso (DFR 80% Interest at Closing; Panthera 20%)

Moydow's flagship asset is the Labola gold exploration project, which is located in the Banfora greenstone belt of the West African Birimian Supergroup in southwest Burkina Faso. Labola is approximately 370km west-southwest of Ouagadougou, and 100km northeast of the Wahgnion gold mine, operated by Endeavour Mining. Significant historic exploration data, as well as recent work by Moydow mean that a maiden resource estimate prepared in accordance with NI 43-101 is expected to be filed before the end of 2021.

Moydow currently holds an exclusive option until 27 May 2024 to purchase 100% of the license holder's interest in the Wuo Land (Labola) exploration license through the payment of US$1.0m. An additional payment of US$1.0m will be made to the license holder upon the successful definition and reporting of a resource of at least 1,000,000 ounces of gold (under JORC guidelines). In addition, the license holder will retain a 1% net smelter return royalty ("NSR") on all gold produced up to a total aggregate payment of US$2.0m.

At Closing, following a restructuring of the interests of Moydow and Panthera, DFR will be vested with an 80% effective interest in the project with Panthera holding a 20% carried interest. DFR will maintain its 80% interest on the condition that it invests US$18.0m in the project by 30 September 2026. If DFR were to make no investments in Labola during the specified period, subject to the exercise by Panthera of its buy back right (described below), its interest would decrease to no less than 60%.

Panthera shall have the right to acquire an additional 10% holding in Labola on the earlier of (i) 90 days following DFR completing an investment of $18m in Labola; or (ii) 30 September 2026, by making a payment to DFR of up to $7.2m, to be adjusted down based on DFR's actual investment in the Labola project during the specified period.

Moydow has benefited from exploration activities undertaken at Labola by previous operators, High River Gold Mines Limited ("HRG") (now Nord Gold SE ("Nord Gold")) and Taurus Gold Limited ("Taurus") having executed an Exploration Data, Reports and Samples Purchase Agreement on 9 October 2020 with Nord Gold to purchase all of their historic data in consideration of a 0.5% NSR capped at US$3.0m.

More than 65,500m of drilling (541 holes) has been completed across multiple drilling campaigns by HRG and Taurus, consisting of principally diamond and RC drilling (24,589m/39,339m, respectively). Mineralization has been intercepted in three main zones over a 14km strike length. Previous historical drilling and historical artisanal mining has demonstrated continuity of mineralization within two of the three zones over strike lengths of up to 9km. Historical ground IP surveys, acquired by Moydow, highlight the opportunity for further extensions and additional zones.

Moydow has recently consolidated all the previous exploration data into a single database for the first time in the project's history. The database includes an extensive amount of information, including drilling and soil sampling data, ground and airborne geophysics and Lidar surveys. Moydow recently completed its inaugural exploration drilling program, which included 4,740m of RC drilling, with assay results expected in Q3 2021. The twin drilling and exploration programs are expected to confirm the historic database, outline some potential new extensions, and support efforts aiming to report a maiden resource estimate prepared in accordance with NI 43-101.

The drill program comprises twin drilling of 19 holes in two areas of known, high grade mineralization, 7 infill holes as well as 5 exploration drill holes to test potential extensions. Gold mineralization at Labola is related to quartz veining, areas of silica alteration and disseminated pyrite. A previous ground IP survey highlighted the coincidence between mineralized zones and high chargeability (sulfides) and resistivity (quartz veining and silicification) anomalies. This correlation outlines many additional opportunities for resource expansion drilling in the future.

The twin drill program will examine the coarse gold component of the mineralization via the accelerated cyanide leach technique "LeachWell". This assay method will involve full leaching of larger samples to test for coarse and fine free gold so that a comparison can be undertaken with historical results. Historical artisanal activity indicates that the Labola deposit has a significant amount of free gold which historical assay data may not have fully recognized.

Following completion of the current exploration drilling program, a maiden resource estimate is targeted, followed by further infill and extensional drilling, metallurgical, plant and infrastructure studies with a view to the preparation of a Preliminary Economic Assessment.

The Company notes the recent security concerns related to north-east Burkina Faso. Whilst Labola is located in the south-west of the country, in an area less prone to instability, the safety and security of all employees and contractors is of the upmost importance. DFR will therefore closely monitor developments in country and will take appropriate actions as required.

Kalaka - Mali (DFR 40% interest at Closing; Panthera 40%)

The Kalaka gold project is located 260km SE of Bamako in South Mali, 80km south of the 8 Moz Morila gold mine owned by Barrick/AngloGold and 85km northwest of the 6 Moz Syama gold mine owned by Resolute. On Closing, Moydow will control a 40% interest in the project with Panthera also controlling a 40% interest and acting as operator; a local participant will hold the remaining 20% interest. All project interests are participating.

Previous exploration work includes 7,349 soil samples, airborne geophysics comprising 909-line km magnetics and EM, ground IP and 20,952m RAB, AC, RC and DD drilling in 372 holes. This work indicates a large, low-grade zone of mineralization with multiple drill intersections exceeding 150m at the 0.5 g/t Au level at the K1A prospect, just one of several similar targets within the 62.5km2permit area along an interpreted 47km combined strike. Similarities between the mineralization at K1A and Morila have been noted, in particular, the early intrusion hosted mineralization at Morila.

At the K1A prospect, there is a substantial zone of mineralization that is about 750m long, 150m wide and open at depth (but at least 200m deep) grading 0.4-0.6g/t Au. Drill intercepts from previous explorers include:

249.3m @ 0.54g/t Au from 52m (to end of hole) including 8m @ 3.17g/t Au from 107m 176.4m @ 0.49g/t Au from 24m (to end of hole) including 8m @ 1.83g/t Au from 52m 191.8m @ 0.52g/t Au from 9m (to end of hole) including 6m @1.47g/t Au and 4m @ 2.47g/t Au

Potential also exists for higher grade zones of mineralization to the south of the license area, where extensive artisanal workings exist, and high grade (10g/t) rock chip samples have been reported.

An exploration program is currently underway including a recently completed further Gradient Array IP survey over the southern part of the Kalaka license area. This survey extended Moydow's previous IP survey over the K1A prospect. The previous IP survey defines the large, low-grade K1A mineralization. The latest survey has enhanced the definition of existing targets as well as identifying several additional targets, in particular in the east of the survey area. Despite ongoing constitutional issues in Mali, exploration activities have been unaffected.

The Kalaka exploration license is currently held through a subsidiary of Moydow under a joint venture agreement with a local joint venture participant, pursuant to which there is an obligation to pay the local participant a fee of US$80,000 (or equivalent in shares) and incur exploration expenditure of approximately US$312,000 by 31 December 2021 and a further US$300,000 by 30 June 2022. The local participant is also entitled to a gross royalty capped at US$3m in total.

Other Projects (DFR 10% interest at Closing, earning up to 32.5%)

Moydow also holds a 20% interest in various gold exploration projects in Nigeria, where historically very little systematic, modern exploration has been undertaken. The projects are located within the gold-bearing ("Schist Belt") terrain of the Benin-Nigeria Shield, which has broad similarities to the Birimian of the Man Shield of West Africa. This area has become one of the most productive gold provinces globally over the past 35 years. Pursuant to the Transaction, Moydow and Panthera will each hold an equal 10% interest in these projects and, together, they can earn up to a 65% combined interest (32.5% each) by funding US$2m in total project expenditures on or before July 2023. The remaining interest is held by the local joint venture participant. First Pass drilling and other early-stage exploration work has been completed on the projects through the expenditure of approximately US$783,000 to date.

Transaction Structure, Founder Investments and Ongoing Rights

DFR and Panthera have entered into an implementation agreement (the "Implementation Agreement") pursuant to which both parties, subject to conditions (as described in more detail below), have agreed to carry out the steps required to implement the Transaction. DFR and Brian Kiernan have entered into a share exchange agreement (the "Kiernan Exchange Agreement") pursuant to which Brian Kiernan has agreed, subject to conditions, to sell to DFR all ordinary shares of Moydow held by him in exchange for common shares of DFR on the basis of one common share of Moydow for 16.46 common shares of DFR (the "Exchange Ratio"). Separately, DFR has entered into share exchange agreements (on the same terms as the Kiernan Exchange Agreement) with each of the Minority Shareholders and options exchange agreements with each holder of management options to acquire all of the remaining securities in Moydow other than those retained by Panthera.

In connection with the Transaction, Brian Kiernan and Jean-Raymond Boulle, through Spirit Resources SARL ("Spirit"), have executed subscription agreements with DFR and otherwise agreed to invest a combined US$2.75m as part of the Transaction ("Founder Investments") as follows:

Brian Kiernan has agreed to exercise US$350,000 of his options in Moydow (the "Moydow Options") (which will be exchanged for common shares of DFR at the Exchange Ratio on Closing) and to make a further investment of US$900,000 in DFR by way of a subscription for 4,147,465 common shares of DFR at a price per common share of US$0.217 (the "Kiernan Subscription") conditional on the closing of the Transaction. The exercise of the Moydow Options and the Kiernan Subscription, together with a recent exercise of US$250,000 Moydow Options by Brian Kiernan, will result in an aggregate capital contribution of US$1.5m. Jean-Raymond Boulle, via Spirit, will invest US$1.5m into DFR through the exercise of 10,666,667 existing warrants having an exercise price of Canadian 12.5 cents (C$1,333,334 or approximately US$1,063,264) (the "Warrant Exercise") and an additional investment of US$436,736 at a price per common share of US$0.217 (the "Spirit Subscription") conditional on closing of the Transaction.

The funds received from the Warrant Exercise will be used to repay an existing US$1,000,000 loan, as well as interest amounting to US$15,123 thereon, held by Spirit with the remaining funds received pursuant to the Founder Investments to be used for working capital.

In addition, Brian Kiernan, Spirit and Panthera hold warrants to subscribe to up to 70,000 Moydow shares each at a price of US$3.50 per share until 31 December 2021 (the "Moydow Warrants"). Any shares acquired pursuant to the exercise of the Moydow Warrants will convert to shares in DFR at the Exchange Ratio on Closing.

Assuming completion of the Transaction and Founder Investments and all Moydow Warrants having been exercised prior to Closing, existing DFR and Moydow shareholders will own approximately 57.4% and 42.6%, respectively, of the DFR common shares immediately following completion. Under the Kiernan Exchange Agreement and the other exchange agreements with the minority security holders of Moydow, an aggregate of 4,150,000 Moydow shares will be exchanged for an aggregate 68,309,000 newly issued DFR shares, and 400,000 Moydow options will be exchanged for an aggregate 3,571,320 DFR shares. Assuming exercise of all Moydow Warrants, DFR will issue to the warrant holders an aggregate of 3,456,600 DFR shares. Following completion of the Transaction, Founder Investments and assuming exercise of all of the Moydow Warrants, Jean-Raymond Boulle will hold (through Spirit) 42.8% of DFR's outstanding shares and Brian Kiernan will hold 37.5% of DFR's outstanding shares.

Under the terms of the Kiernan Exchange Agreement, Brian Kiernan will be appointed as a Director, and Chairman of DFR at Closing. As long as Brian Kiernan beneficially owns, directly or indirectly, more than 25% of the issued and outstanding DFR shares, he will be entitled to a total of two nominees on the DFR board of directors. If Brian Kiernan beneficially owns, directly or indirectly, at least 10% but less than 25% of the issued and outstanding DFR Shares, Mr Kiernan shall only be entitled to one nominee on the Board of Directors. Given Brian Kiernan's long-term commitment to the Company, the consideration shares to be received by Mr Kiernan will be subject to a 30 month hold period from the time of Closing, during which time they cannot be sold, transferred, pledged, assigned or disposed of.

Transaction Approvals and Timeline

DFR expects the Transaction to constitute a Fundamental Acquisition under policy 5.3 _- Acquisitions and Dispositions of Non-Cash Assets_of the TSX Venture Exchange (the "TSX-V").

The terms of the Transaction have been approved by the Board of Directors of DFR. Certain DFR directors with an interest in Moydow abstained from voting on the Transaction in accordance with applicable law, namely, Messrs. Gourley and Reading. Pursuant to the terms of the Implementation Agreement, the closing of the Transaction is subject to a number of conditions including: the approval of the Transaction by the TSX-V, any shareholder approvals required by the TSX-V (including shareholder approval of Brian Kiernan as a new "control person'" of DFR in accordance with the rules of the TSX-V) and satisfactory confirmatory due diligence by DFR.

Under the rules and policies of the TSX-V and applicable Canadian securities laws, DFR will prepare and file on SEDAR a technical report in respect of the Labola project in accordance with NI 43-101. A shareholder meeting may be required by the TSX-V to approve the Transaction. It is anticipated that the Transaction will close during the first quarter of 2022 following such shareholder meeting as may be required by the TSX-V.

DFR confirms that, notwithstanding the fact that certain shareholders and directors of the Company also hold shares of Moydow and a director of Moydow is also a director of DFR, DFR has carried out an analysis under Multilateral Instrument 61-101 - _Protection of Minority Security Holders in Special Transactions_("MI 61-101") and confirms that the Transaction is not a related party transaction under MI 61-101. The Spirit Subscription is considered a related party transaction under MI 61-101 due to the fact that Spirit is a major shareholder of and a related party to DFR. The Spirit Subscription is exempt from the formal valuation and minority shareholder approval requirements under MI 61-101 (pursuant to subsections 5.5(b) and 5.7(a)) on the basis that the Company is not listed on a specified market and the fair market value of the common shares to be issued to Spirit does not exceed 25% of DFR's current market capitalization. The Spirit Subscription was approved by the Company's independent directors.